Killing Sacred Cows Blog

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 This is the continuation of a series of responses to a review of Killing Sacred Cows by Helen Huntley, personal finance editor for the St. Petersburg Times. While she does her best to give a synopsis of the book without reading it entirely, at one point she says, “…the main purpose of the book seems to be to convince you to cash you’re your 401(k) -- [Garrett] doesn’t mind that you have to pay income tax and possibly a 10% penalty…”

I’ve already discussed what the main purpose of the book is, and now I want to talk about the 401(k) issue.

If any readers are taking from the book that Garrett is specifically recommending to them that they should liquidate their 401(k), we stress that this is not the case at all. While we do deal extensively with the dangers of qualified plans, we never once make the blanket recommendation that every individual should cash out of them.

In fact, to be true to the thesis of the book, there may be some for whom the advice we give is not a good fit at all based on the context of their individual circumstances. One aspect of the conventional financial planning industry that we take issue with is the practice of recommending products and strategies out of context.

There’s a significant difference between content and context. In this case, how we discuss the 401(k) is content; the context in which that content is discussed says that your financial decisions are unique to you and your situation. For some people, a 401(k) may be great; for others it may be useless. If people can overcome the fifteen dangers of a 401(k) that we outline on page 253 of the book, a 401(k) would be a perfectly suitable investment for them. For some, whole life insurance is a productive, valuable product; for others it would be a big mistake. For some, stock market investing is great; for others it is risky and destructive.

There Are No Risky Investments

One of the most important points of the book is that there are no inherently risky investments; just risky investors. It is individuals that determine the success or failure of any investment.

As Garrett says on page 150,

"What is risky to one person could be the safest investment in the world for another. Any time someone asks me questions such as, 'Is real estate risky?' or 'Isn't it risky to quit your job to start a business?' my answer is always, 'It depends.' These things certainly can be risky -- to some people -- but they can also be very wise and safe for others.

"I have friends who have done very well in real estate, and others who have lost big with real estate. The difference is that those who do well have more knowledge, they write better contracts, they know how to manage their properties, and they mitigate their risk by doing thorough due diligence on the people who use their properties. In addition, those who I've seen thrive with real estate happen to love working with real estate; it's in their Soul Purpose. The others have very little knowledge of real estate (most of the time they get into it only because they think it will make them a lot of money), they write poor contracts that open them up to great risk, they manage their properties poorly, and often these properties are damaged by renters the owners never checked out properly. The risk or lack thereof isn't in the real estate; it's in the people who invest in it."

So what should you do with your 401(k)? Quite simply, without knowing the context of your life, we don’t know. Garrett would never make such a direct recommendation without knowing the context of your life and he’s not trying to directly convince you to cash yours out in the book.

What You Should Invest In

Another criticism that Helen Huntley makes in her review is to say, “The only investments he endorses in the book, at least in the parts I read, are real estate and permanent life insurance.” Once again, the problem with this is that she speaks of content out of context.

Just as liquidating a 401(k) is never recommended for any particular individual, likewise real estate and permanent life insurance are never specifically endorsed. They are discussed at length, but only to provide examples and explain certain concepts. They would only be endorsed within the proper context.

The one investment that is directly recommended for every reader is an investment in oneself. As you’ll find on page 155,

“There’s one critical litmus test to perform on yourself whenever you are wondering what to invest in. The answer is always – without exception – to invest in yourself. If your human life value were developed enough and if developing it was your first priority, you would never need to ask what to invest in, because your path would be clear. The best investment you can ever make is to increase your human life value, or your ability to utilize your knowledge and abilities to create value in the world. Turn inward for personal improvement and value will flow outward to those around you.

“What this means is that you are your best investment. Not your 401(k), not your Roth IRA, not your mutual fund, not your house or your rental properties – YOU. If you want to mitigate your risk and enjoy high returns, then start doing everything you can to invest in yourself. Read books, go to school to gain new knowledge and learn new skills, attend educational seminars frequently, associate with people that you can learn from, take action and learn from your mistakes."

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